Revolutionizing product development

The Many Futures of Contracts Moving Beyond Structure and Safeguarding to Coordination and Adaptation

Research Summary: Platform owners sometimes enter complementors' product spaces and compete against them. Using data from Amazon.com to study Amazon's entry pattern into third‐party sellers' product spaces, we find that Amazon is more likely to target successful product spaces. We also find that Amazon is less likely to enter product spaces that require greater seller efforts to grow, suggesting that complementors' platform‐specific investments influence platform owners' entry decisions. While Amazon's entry discourages affected third‐party sellers from subsequently pursuing growth on the platform, it increases product demand and reduces shipping costs for consumers. We consider the implications of these findings for complementors in platform‐based markets. Managerial Summary: Platform owners can exert considerable influence over their complementors' welfare. Many complementors with successful products are pushed out of markets because platform owners enter their product spaces and compete directly with them. To mitigate such risks, complementors could build their businesses by aggregating nonblockbuster products or focusing on products requiring significant platform‐specific investments to grow. They should also develop capabilities in new product discovery so that they could continually bring innovative products to their platforms.

Competing with complementors: An empirical look at Amazon.com

This paper shows that market frictions are fundamental building blocks for an organizational economics approach to strategic management. Various organizational economic approaches (transaction costs, property rights, real options, and resource-based) have distinctive focal problems and emphasize different combinations of market frictions. A wider recognition of the role of market frictions is useful for three main objectives. First, it helps identify an evolving market-frictions paradigm in strategic management. Second, it shows how two primary questions in strategy of why firms exist and why some firms outperform others and the three primary strategic goals of cost minimization, value creation, and value capture can be better joined and evaluated. Third, different combinations of market frictions can generate new research questions and advance theory development in the strategic management field. Copyright  2013 John Wiley & Sons, Ltd.

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Market frictions as building blocks of an organizational economics approach to strategic management

Diversification and Integration in American Industry

This article classifies empirical research on vertical integration under four approaches – value-added-to-sales, qualitative–quantitative, input–output, and microanalytic. The emphasis here is on the microanalytic approach which has accumulated the most systematic evidence to support its theoretical propositions. In particular, this article emphasizes theoretical and empirical contributions from organizational economics (especially transaction costs and agency theories) for both vertical integration and (vertical) contracting. Limitations and methodological challenges concerning the empirical testing of theories of vertical integration are addressed and suggestions for further research are provided.

Testing Organizational Economics Theories of Vertical Integration

Spinouts are startups founded by employees of established firms in the same industry. Spinouts inherit technological and market-related knowledge from their parent companies. In contrast, non-spinout startups that do not have such close connections to an industry incumbent firm will have a different endowment of technological and market knowledge. Given this contrast between different startups in a risky science-based industry such as biotechnology, we explore whether spinout startups are different from non-spinouts in how control rights are allocated in strategic alliances. We develop a predictive model to distinguish whether an alliance is a spinout startup or a non-spinout startup.

Distinguishing between spinouts and non-spinouts: allocating control rights in biotechnology alliances

What criteria do contractors/buyers apply when hiring teams of suppliers? This paper examines this important strategic question to shed light on buyer-supplier relation-ships and organization of interfirm governance structures. Three research literatures inform the model. Transaction costs theory analyzes the benefits of authority in attenuating opportunism; firm capabilities literature emphasizes relative selection competencies; and the interfirm relations literature posits the positive effects of past relationships. The central proposition is that buyers strategically hire teams of suppliers who engage in discrete, yet interdependent, customized-project activities. We examine criteria that buyers apply when contracting with teams of suppliers for components of low decomposability. Empirical findings show that contractors obtain knowledge of suppliers' capability to absorb and re-utilize team-specific knowledge in subsequent projects. Project contractors use this know-ledge to organize future teams. Moreover, the selection of suppliers depends on the nature of a component and the level of technological uncertainty.

Choosing Teams over Star Players: Strategic Selection of Supplier Teams in Customized Projects

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Testing Organizational Economics Theories of Vertical Integration

Distinguishing between spinouts and non-spinouts: allocating control rights in biotechnology alliances

Choosing Teams over Star Players: Strategic Selection of Supplier Teams in Customized Projects